EXHIBIT 99.3
CREDIT SUISSE FIRST BOSTON (USA), INC.
INDEX TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
PAGE NUMBER
-----------
Introduction........................................................................... 18
Pro Forma Combined Condensed Financial Statements - Credit Suisse
First Boston (USA), Inc.
Pro Forma Combined Condensed Statement of Financial Condition as of
September 30, 2000.............................................................. 21
Pro Forma Combined Condensed Statement of Income for the nine months ended
September 30, 2000 (Unaudited).................................................. 23
Pro Forma Combined Condensed Statement of Income for the year ended
December 31, 1999 (Unaudited)................................................... 24
Notes to Pro Forma Combined Condensed Financial Statements (Unaudited).............. 25
17
CREDIT SUISSE FIRST BOSTON (USA), INC.
Pro Forma Combined Condensed Financial Statements (UNAUDITED)
INTRODUCTION
On November 3, 2000, Credit Suisse First Boston (USA), Inc., formerly known as
Donaldson, Lufkin & Jenrette, Inc. (the "Company"), became an indirect wholly
owned subsidiary of Credit Suisse Group ("CSG"), a corporation organized under
the laws of Switzerland, upon completion of a number of related transactions
(such transactions, collectively, the "Transaction").
In conjunction with the closing of the Transaction, also on November 3, 2000,
Credit Suisse First Boston, Inc. ("CSFBI"), a wholly owned subsidiary of CSG,
transferred all of the outstanding shares of Credit Suisse First Boston
Corporation ("CSFB Corp."), a U.S. registered broker dealer that is a wholly
owned subsidiary of CSFBI, to the Company in exchange for newly issued Shares of
the Company. This was the final step in a series of transfers (collectively, the
"Transfer") that was initiated by CSG and the Company on October 6, 2000 with a
view to integrating their respective businesses. As a result of the Transfer,
CSFB Corp. became a direct wholly owned subsidiary of the Company. Since the
Transfer is a transfer of assets and liabilities between entities under common
control it will be accounted for at historical cost in a manner similar to a
pooling of interests. Certain U.S., and all non-U.S., operations of the Credit
Suisse First Boston Business Unit are not conducted through CSFB Corp. and, as a
result, the financial positions and results of operations of such other
activities are not included in the combined businesses of the Company resulting
from the Transfer.
The following unaudited pro forma combined condensed financial statements of the
Company have been prepared in connection with the Transfer, and are intended to
illustrate the possible scope of the change in the Company's historical
financial position and results of operations caused by the Transfer. The pro
forma financial statements are not intended to illustrate any possible effects
on the Company that are not associated with the Transfer. In particular, the pro
forma financial statements are not intended to illustrate any possible effects
on the Company that are associated with or incidental to the Transaction through
which the Company has been acquired by CSG. However, certain preliminary
information with respect to the expected accounting treatment of the Transaction
and its possible effects on the Company's financial statements is set forth
below under "Certain Information Regarding the Acquisition of the Company by
Credit Suisse Group."
The unaudited pro forma combined condensed financial statements are based on the
Company's historical consolidated financial statements adjusted to give effect
to the Transfer. The unaudited pro forma combined condensed statements of income
of the Company for the year ended December 31, 1999 and for the nine-month
period ended September 30, 2000 present results for the Company as if the
Transfer had occurred as of January 1, 1999. The unaudited pro forma combined
condensed statement of financial condition as of September 30, 2000 gives effect
to the Transfer as if it had occurred as of September 30, 2000. This information
is presented for illustrative purposes only. The Company's financial statements
will reflect the effects of the Transfer only from November 3, 2000, the date on
which it was actually completed. In addition, the results of operations for the
first nine months ended September 30, 2000 may not be indicative of results of
operations for the year ended December 31, 2000 due to the effects of the
Transaction and market and other conditions in the second half of the year ended
December 31, 2000.
The unaudited pro forma combined condensed financial information does not
purport to represent what the Company's financial position or results of
operations actually would have been had the Transfer in fact occurred on the
dates indicated, or to project the Company's financial position or results of
operations for any future date or period. The Company's actual financial
position and results of operations will differ, perhaps significantly, from the
pro forma amounts reflected herein because of a variety of factors, including
those described below under "Certain Information Regarding the Acquisition of
the Company by CSG."
18
CREDIT SUISSE FIRST BOSTON (USA), INC.
Pro Forma Combined Condensed Financial Statements (UNAUDITED)
The pro forma adjustments are based on currently available information and
certain assumptions that the Company currently believes are reasonable in the
circumstances. The unaudited pro forma combined condensed financial information
should be read in conjunction with the audited consolidated financial statements
of the Company and notes thereto as filed on Form 10-K as of and for the year
ended December 31, 1999, and the unaudited consolidated financial statements and
accompanying notes thereto of the Company as filed on Form 10-Q as of and for
the nine-month period ended September 30, 2000, both of which are hereby
incorporated by reference; and the audited consolidated financial statements of
CSFB Corp. as of December 31, 1999 and 1998 and for the three-year period ended
December 31, 1999, which are included as Exhibit 99.2 to the Company's Current
Report on Form 8-K dated November 3, 2000, and the unaudited condensed
consolidated financial statements of CSFB Corp. as of September 30, 2000 and
for the nine-month periods ended September 30, 2000 and 1999, which are
included elsewhere herein.
CERTAIN INFORMATION REGARDING THE ACQUISITION OF THE COMPANY BY CREDIT SUISSE
GROUP
The unaudited pro forma combined condensed financial statements are intended to
illustrate only certain possible effects of the Transfer through which the
Company acquired CSFB Corp.; they are not intended to illustrate any of the
possible effects of the Transaction through which CSG acquired the Company. As a
result, the pro forma financial statements and the notes thereto do not reflect
or describe a number of factors associated with the Transaction that could
affect the Company's actual results of operations and financial position such as
those described herein.
Set forth below is certain preliminary information with respect to the expected
effects of the Transaction on the Company's results of operations and financial
position. This description is based on currently available information and
reflects certain important assumptions. The actual effect of the Transaction on
the Company's results of operations and financial position has not yet been
determined and could differ in significant respects from the description below.
Moreover, the information set forth below is not intended to be exhaustive.
Other factors associated with the Transaction that are not described below may
affect the Company's results of operations and financial position, and such
effects could be significant.
o ACCOUNTING TREATMENT OF THE TRANSACTION. CSG will account for the
acquisition of the Company through the Transaction using the
purchase method of accounting. However, because the Company will
continue to have significant preferred stock and public debt
outstanding, no adjustments of the historical carrying values of
the Company's assets and liabilities to reflect the Transaction
will be recorded in the Company's historical financial statements.
Similarly, although the Transaction will give rise to significant
goodwill, none of this goodwill will be "pushed down" to the
Company and thus goodwill associated with the Transaction will not
be recorded in the Company's financial statements.
o EFFECT OF THE TRANSACTION ON OUTSTANDING SECURITIES OF THE
COMPANY. Through the Transaction, CSG and its subsidiaries
acquired 100% of the voting shares of the Company (that is, the
common stock of the Company of the series designated Donaldson,
Lufkin & Jenrette, Inc. - DLJ Common Stock, par value $.10 per
share) (the "Shares"). The Company's DLJDIRECT tracking stock
(that is, the common stock of the Company of the series designated
Donaldson, Lufkin & Jenrette, Inc. - DLJdirect Common Stock, par
value $.10 per share) and all other securities of the Company
outstanding prior to the completion of the Transaction were not
directly affected by the Transaction and remain outstanding, other
than the Shares and certain debt securities that were redeemed in
connection with the Transfer as reflected in the pro forma
financial statements. Options to acquire Shares were converted in
the Transaction into options to acquire CSG shares.
o RESTRUCTURING CHARGES TO BE RECORDED BY THE COMPANY. The Company
currently anticipates that it will record restructuring charges,
on a pre-tax basis, in connection with the Transaction of between
$900 million and $1.2 billion. This is a preliminary estimate, and
it is possible that the final restructuring charge may be outside
the range. The expected restructuring charges are primarily
associated with severance payments to employees, elimination of
redundant office facilities and write-off of related assets.
19
CREDIT SUISSE FIRST BOSTON (USA), INC.
Pro Forma Combined Condensed Financial Statements (UNAUDITED)
o RETENTION PLAN AND OTHER RETENTION CHARGES TO BE RECORDED BY THE
COMPANY. In connection with the Transaction, a retention plan has
been put in place for certain of the Company's employees. The
retention plan provides for grants of CSG shares for future
services above current compensation levels. The CSG shares granted
for future services vest over a three-year period, and the total
expense associated with these grants is expected to be
approximately $1.2 billion, which will be expensed over the
vesting period. This amount will be recorded as compensation
expense in the Company's statements of income for the
corresponding future periods.
o RELATED PARTY TRANSACTION. In conjunction with the Transaction,
CSG and its subsidiaries obtained a $3.1 billion loan from the
Company that matures on November 1, 2001 and bears interest at a
spread above six-month LIBOR. Of this aggregate loan amount, $1.9
billion was applied in connection with the Transaction to the
purchase of Shares held by AXA, S.A., formerly the Company's
ultimate parent, and certain of its affiliates (the "AXA
Entities") pursuant to a Stock Purchase Agreement dated as of
August 30, 2000, as amended. The remaining $1.2 billion was
applied to the purchase by CSFBI from the AXA Entities on November
6, 2000 of certain shares of Credit Suisse Group, also pursuant to
this Stock Purchase Agreement, which shares will be used by CSFBI
in connection with the retention plan that has been put in place
in connection with the Transaction.
20
CREDIT SUISSE FIRST BOSTON (USA), INC.
Pro Forma Combined Condensed Statement of Financial Condition (UNAUDITED)
September 30, 2000
(IN MILLIONS, EXCEPT FOR SHARE AND PER SHARE DATA)
Credit Suisse
Credit Suisse First Boston
First Boston (USA), Inc.
(USA), Inc. CSFB Corp. Pro Forma Pro Forma
(Historical) (Historical) Adjustments Combined
-------------- ------------ ------------ --------------
ASSETS
Cash and cash equivalents .......................... $ 4,297 $ 196 $ (245)(D) $ 4,247
(1)(C)
Cash and securities segregated for regulatory
purposes or deposited with clearing organizations 81 3,873 3,954
Collateralized short-term agreements:
Securities purchased under agreements to resell . 23,990 38,660 (6,077)(A) 56,573
Securities borrowed ............................. 24,416 58,601 (1,593)(A) 81,424
Securities pledged as collateral ................... -- 5,004 5,004
Receivables:
Customers ....................................... 11,038 948 11,986
Brokers, dealers and other ...................... 8,490 3,606 (81)(A) 11,984
(31)(C)
Financial instruments owned, at value:
U.S. government and agencies .................... 13,365 10,310 (5)(C) 23,670
Corporate debt .................................. 5,433 7,910 13,343
Non - U.S. government securities ................ 1,091 304 1,395
Mortgage whole loans ............................ 4,600 -- 4,600
Equities and other .............................. 2,290 12,746 (1)(C) 15,035
Long-term corporate development investments ..... 1,303 -- (25)(C) 1,278
Office facilities, at cost (net of accumulated
depreciation and amortization) .................. 722 228 950
Goodwill (net of amortization) ..................... 79 272 (23)(C) 328
Other assets and deferred amounts .................. 2,556 700 (1)(C) 3,261
6 (D)
-------- -------- -------- --------
Total Assets ....................................... $103,751 $143,358 $ (8,077) $239,032
======== ======== ======== ========
See accompanying notes to pro forma combined condensed financial statements.
21
CREDIT SUISSE FIRST BOSTON (USA), INC.
Pro Forma Combined Condensed Statement of Financial Condition (UNAUDITED)
September 30, 2000
(IN MILLIONS, EXCEPT FOR SHARE AND PER SHARE DATA)
Credit Suisse
Credit Suisse First Boston
First Boston (USA), Inc.
(USA), Inc. CSFB Corp. Pro Forma Pro Forma
(Historical) (Historical) Adjustments Combined
------------- ------------ ----------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Commercial paper and short-term borrowings ..................... $ 856 $ 9,889 $ -- $ 10,745
Collateralized short-term financings:
Securities sold under agreements to repurchase ............. 47,736 55,607 (6,077)(A) 97,266
Securities loaned .......................................... 11,747 28,507 (1,593)(A) 38,661
Obligation to return pledged securities ........................ -- 5,919 5,919
Payables:
Customers .................................................. 7,423 4,927 12,350
Brokers, dealers and other ................................. 7,907 9,437 (81)(A) 17,263
Financial instruments sold not yet purchased, at value:
U.S. government and agencies ............................... 5,085 15,164 20,249
Non - U.S. government securities ........................... -- 392 392
Corporate debt ............................................. 739 2,601 3,340
Equities and other ......................................... 5,133 1,554 6,687
Accounts payable and accrued expenses .......................... 3,129 2,830 (3)(D) 5,908
(48)(C)
Other liabilities .............................................. 1,130 -- 1,130
Long-term borrowings ........................................... 7,747 -- (225)(D) 7,522
Subordinated borrowings ........................................ 1 4,150 4,151
Company-obligated mandatorily redeemable trust securities of
subsidiary trust holding solely debentures of the Company .. 200 -- 200
Stockholders' Equity:
Preferred stock, 50,000,000 shares authorized:
Series A Preferred Stock, at $50.00 per share
liquidation preference (4,000,000 shares
issued and outstanding) ............................. 200 -- 200
Series B Preferred Stock, at $50.00 per share liquidation
preference (3,500,000 shares issued and outstanding) . 175 -- 175
Common Stock, 1,500,000,000 shares authorized:
CSFB (USA), Inc. Common Stock .......................... 14 -- 14
DLJDIRECT Common Stock ................................. 2 -- 2
Restricted stock units (10,358,294 units authorized;
51,430 and 1,099,955 units issued and outstanding,
respectively) ......................................... 1 -- 1
Paid-in capital ............................................ 1,897 2,084 297 (B) 4,276
(2)(C)
Retained earnings .......................................... 2,631 297 (297)(B) 2,583
(11)(D)
(37)(C)
Accumulated other comprehensive income ..................... (2) -- (2)
Employee deferred compensation stock trust ................. 14 -- 14
Common stock issued to employee deferred compensation
trust ................................................. (14) -- (14)
--------- ------- --------- ---------
Total stockholders' equity ............................ 4,918 2,381 (50) 7,249
--------- ------- --------- ---------
Total Liabilities and Stockholders' Equity ..................... $ 103,751 143,358 $ (8,077) $ 239,032
========= ======= ========= =========
See accompanying notes to pro forma combined condensed financial statements.
22
CREDIT SUISSE FIRST BOSTON (USA), INC.
Pro Forma Combined Condensed Statement of Income (UNAUDITED)
Nine Months Ended September 30, 2000
(IN MILLIONS, EXCEPT FOR SHARE AND PER SHARE DATA)
Credit Suisse
Credit Suisse First Boston
First Boston (USA), Inc.
(USA), Inc. CSFB Corp. Pro Forma Pro Forma
(Historical) (Historical) Adjustments Combined
------------- ------------ ----------- -------------
Revenues:
Commissions........................................... $ 1,148 $ 561 $ (2)(C) 1,707
Underwritings......................................... 585 1,033 1,618
Fees.................................................. 1,391 740 (101)(C) 2,030
Net interest income (expense)......................... 611 (92) 519
Principal transactions-net:
Trading............................................. 777 870 1,647
Investment.......................................... 197 - (7)(C) 190
Other................................................. 80 19 (1)(C) 98
---------- ---------- ------------ ----------
Total revenues..................................... 4,789 3,131 (111) 7,809
-------- --------- ---------- ----------
Costs and Expenses:
Compensation and benefits............................. 2,729 2,229 (40)(C) 4,918
Communications and technology......................... 392 137 (5)(C) 524
Brokerage, clearing, exchange fees and other.......... 289 108 (33)(C) 364
Occupancy and related costs........................... 160 125 (4)(C) 281
Other operating expenses.............................. 493 317 (9)(C) 801
---------- ---------- ---------- ----------
Total costs and expenses........................... 4,063 2,916 (91)(C) 6,888
--------- --------- --------- ----------
Income before provision for income taxes.................. 726 215 (20) 921
---------- ---------- --------- ----------
Provision for income taxes................................ 269 67 (9) 327
---------- ----------- ----------- ----------
Net income................................................ $ 457 $ 148 $ (11) $ 594
========= ========= =========== ==========
Dividends on preferred stock.............................. $ 16 $ 16
========== ==========
Earnings applicable to common shares...................... $ 441 N/M
=========
Earnings applicable to common shares:
CSFB (USA), Inc....................................... $ 440 N/M
DLJDIRECT............................................. $ 1 $ 1
========= ==========
Earnings per common share:
CSFB (USA), Inc.
Basic.............................................. $ 3.43 N/M
Diluted............................................ $ 3.15 N/M
========
DLJDIRECT
Basic.............................................. $ 0.03 $ 0.03
Diluted............................................ $ 0.03 $ 0.03
======== ==========
Weighted average common shares:
CSFB (USA), Inc.
Basic.............................................. 128,387,000 N/M
Diluted............................................ 140,022,000 N/M
============
DLJDIRECT
Basic.............................................. 18,400,000 18,400,000
Diluted............................................ 18,420,000 18,420,000
============ ==========
See accompanying notes to pro forma combined condensed financial statements.
23
CREDIT SUISSE FIRST BOSTON (USA), INC.
Pro Forma Combined Condensed Statement of Income (UNAUDITED)
Year Ended December 31, 1999
(IN MILLIONS, EXCEPT FOR SHARE AND PER SHARE DATA)
Credit Suisse
Credit Suisse First Boston
First Boston (USA), Inc.
(USA), Inc. CSFB Corp. Pro Forma Pro Forma
(Historical) (Historical) Adjustments Combined
------------ ------------ ------------ -----------
Revenues:
Commissions......................................... $ 1,201 $ 516 $ (2)(C) $ 1,715
Underwritings....................................... 1,246 909 2,155
Fees................................................ 1,612 747 (95)(C) 2,264
Net interest income................................. 585 5 1 (C) 591
Principal transactions-net:
Trading........................................... 719 755 1,474
Investment........................................ 107 - (3)(C) 104
Other............................................... 86 14 100
---------- ---------- ----------- --------
Total revenues................................... 5,556 2,946 (99) 8,403
-------- -------- --------- -------
Costs and Expenses:
Compensation and benefits........................... 3,105 2,222 (36)(C) 5,291
Communications and technology....................... 445 147 (4)(C) 588
Brokerage, clearing, exchange fees and other........ 314 127 (26)(C) 415
Occupancy and related costs......................... 179 155 (5)(C) 329
Other operating expenses............................ 559 314 (9)(C) 864
---------- -------- ---------- ---------
Total costs and expenses......................... 4,602 2,965 (80) 7,487
--------- ------- --------- --------
Income (loss) before provision (benefit) for income
taxes............................................... 954 (19) (19) 916
--------- -------- --------- ---------
Provision (benefit) for income taxes.................... 353 (35) (9) 309
--------- -------- ---------- ---------
Net income.............................................. $ 601 $ 16 $ (10) $ 607
========= ======== ======== ========
Dividends on preferred stock............................ $ 21 $ 21
========= =========
Earnings applicable to common shares.................... $ 580 N/M
========= =========
Earnings (loss) applicable to common shares:
CSFB (USA), Inc..................................... $ 581 N/M
DLJDIRECT........................................... $ (1) $ (1)
========= =========
Earnings (loss) per common share:
CSFB (USA), Inc.
Basic............................................ $ 4.63 N/M
Diluted.......................................... $ 4.18 N/M
=========
DLJDIRECT
Basic............................................ $ (0.05) $ (0.05)
Diluted.......................................... $ (0.05) $ (0.05)
========= =========
Weighted average common shares:
CSFB (USA), Inc.
Basic............................................ 125,433,000 N/M
Diluted.......................................... 138,868,000 N/M
===========
DLJDIRECT
Basic............................................ 18,400,000 18,400,000
Diluted.......................................... 18,400,000 18,400,000
============ ==========
See accompanying notes to pro forma combined condensed financial statements.
24
CREDIT SUISSE FIRST BOSTON (USA), INC.
Notes to Pro Forma Combined Condensed Financial Statements (UNAUDITED)
1. DESCRIPTION OF TRANSACTION AND BASIS OF PRESENTATION
On November 3, 2000, Credit Suisse First Boston (USA), Inc., formerly known as
Donaldson, Lufkin & Jenrette, Inc. (the "Company"), became an indirect wholly
owned subsidiary of Credit Suisse Group, a corporation organized under the laws
of Switzerland ("CSG"), upon completion of a number of related transactions
(such transactions, collectively, the "Transaction").
In conjunction with the closing of the Transaction, also on November 3, 2000,
Credit Suisse First Boston, Inc., a wholly owned subsidiary of CSG ("CSFBI"),
transferred all of the outstanding shares of Credit Suisse First Boston
Corporation, a U.S. registered broker dealer that is a wholly owned subsidiary
of CSFBI ("CSFB Corp."), to the Company in exchange for newly issued Shares (as
defined in Note 5) of the Company. This was the final step in a series of
transfers (collectively, the "Transfer") that was initiated by CSG and the
Company on October 6, 2000 with a view to integrating their respective
businesses. As a result of the Transfer, CSFB Corp. became a direct wholly owned
subsidiary of the Company. Certain U.S., and all non-U.S., operations of the
Credit Suisse First Boston Business Unit are not conducted through CSFB Corp.
and, as a result, the financial positions and results of operations of such
activities are not included in the combined businesses of the Company resulting
from the Transfer.
These unaudited pro forma combined condensed financial statements have been
prepared in connection with the Transfer, and are intended to illustrate the
possible scope of the change in the Company's historical financial position and
results of operations caused by the Transfer. These pro forma financial
statements are not intended to illustrate any possible effects on the Company
that are not associated with the Transfer. In particular, these pro forma
financial statements are not intended to illustrate any possible effects on the
Company that are associated with or incidental to the Transaction through which
the Company has been acquired by CSG. See "Introduction- Certain Information
Regarding the Acquisition of the Company by Credit Suisse Group".
2. PRO FORMA ADJUSTMENTS
The following pro forma adjustments are included in the accompanying pro forma
combined condensed statement of financial condition and pro forma combined
condensed statements of income:
(A) Eliminate intercompany balances.
(B) Reflects the Transfer of CSFB Corp. to the Company at CSFB Inc.'s
historical book value and to reflect the resulting adjustment to
paid-in-capital.
(C) To record the transfer of DLJ Asset Management Group, Inc. to Credit
Suisse Asset Management LLC.
(D) Reflects the retirement of $225.0 million of 9 5/8% Senior
Subordinated Notes of the Company in connection with the Transfer for
a total consideration of $245.4 million, which includes accrued
interest and a premium.
3. RESTRUCTURING CHARGES
Although not associated with the Transfer (and thus not reflected in the
accompanying pro forma combined condensed financial statements), the Company
currently anticipates that it will record restructuring charges, on a pre-tax
basis, in connection with the Transaction of between $900 million and $1.2
billion. This is a preliminary estimate, and it is possible that the final
restructuring charge may be outside of the range. The expected restructuring
charges are primarily associated with severance payments to employees,
elimination of redundant office facilities and write-off of related assets.
4. RETENTION PLAN AND OTHER RETENTION CHARGES
Although not associated with the Transfer (and thus not reflected in the
accompanying pro forma combined condensed financial statements), a retention
plan has been put in place for certain of the Company's employees in connection
with the Transaction. The retention plan provides for grants of CSG shares for
future services above current compensation levels. The CSG shares granted for
future services vest over a three-year period, and the total expense associated
with these grants is expected to be approximately $1.2 billion, which will be
expensed over the vesting period.
25
CREDIT SUISSE FIRST BOSTON (USA), INC.
Notes to Pro Forma Combined Condensed Financial Statements (UNAUDITED)
5. EARNINGS PER SHARE
Through the Transaction, CSG and its subsidiaries acquired 100% of the voting
shares of the Company (that is, the common stock of the Company of the series
designated Donaldson, Lufkin & Jenrette, Inc. - DLJ Common Stock, par value $.10
per share) (the "Shares"). Accordingly, pro forma earnings per share data with
respect to these Shares would not be meaningful, and is therefore not presented.
The Company's DLJDIRECT tracking stock (that is, the common stock of the Company
of the series designated Donaldson, Lufkin & Jenrette, Inc. - DLJDIRECT Common
Stock, par value $.10 per share) was not directly affected by the Transaction
and remains outstanding. Accordingly, both historical and pro forma earnings per
share data is set forth with respect to the DLJDIRECT tracking stock.
6. REGULATION
The Company's broker dealer subsidiaries, including CSFB Corp., are registered
with the Securities and Exchange Commission and are members of, and subject to
regulation by, a number of securities industry self-regulatory organizations
including the New York Stock Exchange and/or National Association of Securities
Dealers. The Company's London-based broker dealer subsidiaries are subject to
the requirements of the Securities and Futures Authority, a self-regulatory
organization established pursuant to the United Kingdom Financial Services Act
of 1986. Other U.S. and foreign broker dealer subsidiaries of the Company are
subject to net capital requirements of their respective regulatory agencies. At
September 30, 2000 and December 31, 1999, all of the aforementioned broker
dealers were in compliance with all applicable regulatory capital adequacy
requirements.
26